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About the Author

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

Logistics News

By Cliff Holste

September 18, 2013



Short Product Life Cycles Increase Inventory Levels & Decrease Efficiency

Making Better Slotting Decisions Improves DC Performance


Holste Says:

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While sophisticated slotting software is helpful in automating this analysis and making recommend changes as to where slow movers should be stored, using basic excel spreadsheets along with access data base software (as an inexpensive alternative) can often lead to better slotting decisions that can improve DC flow and productivity.
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Previous Columns by Cliff Holste

Sorting It Out: The Typical Distribution Center Business Model Is Rapidly Changing

Sorting It Out: The Cause & Effect of Operational Changes on Order Fulfillment System Performance

Sorting It Out: The Case for Industry Standards & Regulations

Sorting It Out: Don't Let Daily Tactical Issues Subvert Strategic Planning

Sorting It Out: Performance Attributes Differ Across Technologies & Providers

More

Accumulating products in the DC that have lost their luster increases per piece storage and handling cost while reducing order processing efficiency.

Buyers, marketing, and accounting executives are often not aware, or simply do not pay attention, to the increasing level of SKU buildup in the DC. Operations managers could do a better job of communicating this problem by suggesting eliminating some obviously dead SKUs. This would be especially beneficial if the company maintains a fixed picking positions (as many do) for all active items including slow movers.

 

While sophisticated slotting software is helpful in automating this analysis and making recommend changes as to where slow movers should be stored, using basic excel spreadsheets along with access data base software (as an inexpensive alternative) can often lead to better slotting decisions that can improve DC flow and productivity.

Companies that do not have an automated slotting optimization program report that they often have slow movers slotted in premium pick areas. Short product life cycle and seasonality make slot maintenance all the more challenging. A SKU can see lots of volume for awhile, but, then quickly drop off while remaining in a high moving zone.

 

Understanding Dynamic Slot Management

When an order is released that includes a slow moving SKU without a dedicated pick face, a temporary pick slot is created by the WMS, and that slot filled with product from reserve storage to meet that need (alternatively, some companies may even pick slow movers direct from reserve).

For example, slow moving inventory is placed into an AS/RS automated storage/retrieval system (AS/RS) that creates high density product storage without a dedicated pick face for each slow moving SKU. When a pick of one of those SKUs is required, the storage system “serves up” the SKU to a pick face. When order fulfillment is complete the AS/RS places that SKU back into high density storage.

Some companies may also choose to use carousels to handle slow movers. It is noteworthy that carousels are used extensively in service parts distribution – an environment often characterized by huge numbers of mostly slow moving SKUs.

Going back a few years, Coty Inc. found that while its 900 slowest moving SKUs amounted to only about 2 percent of total volume, they led to substantial bottlenecks in order processing. To alleviate this problem, Coty deployed two 65 foot long, five-shelf, light-directed horizontal carousels, which led to much more effective picking operations and storage density for those slow movers.

 

Getting Rid Of the Product Morgue

Slow moving merchandise ends up costing more and more each day it remains in your DC. Someone needs to be assigned to attack the problem. Here are a few ideas that can help you move "stagnant" inventory out of your operation?

EBay – There are thousands of auctions found every day with the keyword "Wholesale". Sign up to become a seller and list your wholesale inventory on eBay. While your excess inventory might not be selling well to your customers, eBay attracts millions of potential wholesale buyers who are searching daily for just about anything in bulk quantities.

Liquidation.com - Here is an auction specifically designed to help retailers, wholesalers, liquidators, manufacturers and others move bulk items. The website boasts several categories of merchandise and just might be the solution you are looking for.

Surplus.net - Offers a way for you to send out what is known as a "Blast" email to all liquidation members explaining the merchandise you have for sale in quantity. Fill out the form describing your inventory and you could have several liquidators’ contact you with cash offers to purchase!

Aside from the three links above, many closeout companies will buy excess merchandise in quantity. When you visit wholesale and closeout websites make sure you look for a link offering to buy inventory.

Or, you can just donate it - By donating overstock and/or slow moving merchandise, your business can qualify for a federal income tax deduction, under 170(e)(3) of the U.S. Internal Revenue Code. Although this deduction has been available for +30 years, there are few corporations taking advantage of it. C corporations may deduct the cost of the inventory donated, plus half the difference between cost and fair-market value. Deductions may be up to twice cost – not a bad deal. SC Digest will publish more information on this approach in a follow-up article.

 


Final Thoughts

Regardless of how you do it, actively managing slow movers and freeing up needed warehouse space is definitely beneficial. Whether you own your warehouse or are renting space, storing product can be expensive; insurance, utilities, labor, shrinkage, and taxes all add up.

 

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